The price of oil could hover around $40 per barrel with a significant effect on the global economic outlook, the SA Reserve Bank said on Tuesday.
Speaking at the annual dinner in honour of ambassadors and high commissioners to South Africa in Pretoria, Governor Tito Mboweni said: ”The behaviour of the oil prices has changed the global economic outlook in a real way.
”The price of North Sea Brent crude oil is now around $38 per barrel and indications are that it might not come down to the Opec target levels of $22 — $28 per barrel in the near future,” Mboweni said.
”The futures price also indicates that the oil price will stay near the $40 per barrel level.”
The International Monetary Fund has estimated that if the oil price averaged $37 a barrel in 2004, South Africa would see economic growth decline by around 0,6%, inflation would increase by around 1,6% and the trade balance would worsen by around 1,4% of gross domestic product.
Mboweni said the oil price was partly influenced by concerns about supply.
Although there were supply problems in Iraq, Russia and Nigeria, among others, these should not be overestimated.
”Time and again, the largest producer of oil in the world, the Kingdom of Saudi Arabia, has made it known that there are sufficient reserves and capacity to ensure that global supply meets demand,” the governor said.
He said Saudi Arabia had indicated it had sufficient oil reserves for the next 50 years.
Despite the high oil price, the global economy had seen good growth. In 2004 global growth was likely to be around five percent, and predicted to be about 4,3% in 2005.
”Based on these forecasts, we can safely say, without any fear of contradiction, that the world economy is still in a good state of growth,” Mboweni said. – Sapa